Some of the world’s largest patent holders say they have invented ‘arms control for the patent world’
Google, SAP, Canon, Dropbox, US retailer Newegg and productivity start-up Asana have established a patent licensing network which aims to protect them against the increasingly popular practice of patent privateering.
Here’s how it works: when the License on Transfer Network (LOTNET) members decide to sell their patents, they are required to first licence those patents to the rest of the network, royalty-free. This way, if the intellectual property ever finds its way into the hands of a ‘patent troll’, LOTNET members remain safe from litigation.
“The LOT Network is a sort of arms control for the patent world,” said Allen Lo, deputy general counsel for patents at Google. “By working together, we can cut down on patent litigation, allowing us to focus instead on building great products.”
LOTNET is aiming to attract more members from diverse industries, and it says every new organisation that joins the network will increase its impact. It is believed that this is the first corporate alliance formed for this purpose.
Non-practicing entities, also known as patent monetisation firms or simply ‘patent trolls’, have been plaguing the IT industry for years. A few of these organisations genuinely help innovators to benefit from their work. The rest use legal loopholes and flaws in the patent legislation to literally extort money from businesses both big and small.
According to LOTNET, more than 6,000 patent lawsuits were filed in the US in 2013 alone, most of them initiated by patent trolls. The organisation adds that it has become a growing trend for businesses to sell their patents to non-practicing entities, which then use the intellectual property to attack other companies. In some cases, patent authors arrange to get a cut of revenue generated from the trolls’ suits.
The constant threat of legal action is blamed for slowing down the pace of innovation, increasing prices to consumers and lowering returns to shareholders, among other things. To combat this trend, some of the top patent holders have decided to unite forces, and invite anyone who shares their views to join in.
Google owns thousands of patents, including the huge ‘war chest’ it acquired in the purchase of Motorola Mobility, the company which is now being sold to Lenovo, sans patents. SAP is though to be one of the biggest software patent holders in Europe, and according to Nikkei Asian Review, Canon had obtained more US patents than any other Japanese company for nine years straight.
The network also includes start-ups, which are likely to be hoping to receive, rather than offer, protection.
Together the current LOTNET members own almost 300,000 patent assets (including 50,000 issued in the US), generate more than $117 billion in revenue and employ more than 310,000 people.
But the group hopes to attract even more participants. “The LOT network is a creative solution to fight patent abuse that becomes more effective with each company that joins. The more participants there are, the better off we’ll all be,” commented Brett Alten, IP counsel at Dropbox.
It is worth noting that LOTNET is not a charity: the members will still have to pay each other licensing fees, with royalty-free mechanism kicking in only when patents are sold outside LOTNET.
Are you a patent expert? Take our quiz!